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Yellen's dovishness soothes stocks

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Yellen chillin' in front of Congress

In her first congressional testimony as Fed chair, Janet Yellen on Tuesday reassured markets that she is just as dovish as her predecessor and that the central bank will not be quick to pull away from stimulus.

Her comments sparked a sharp jump in stocks and fired up a rally that continued into the afternoon session. The Dow was up more than 1 percent at 15,985, and the Nasdaq hit a new high for the year, rising nearly 1 percent. The S&P 500 also was up nearly 1 percent, breaking key technical levels of 1,800 and 1,810.

The 10-year Treasury traded lower, and its yield rose slightly to 2.72 percent.

"I think it's similar to Ben Bernanke's last press conference in that she's upbeat on the economy, so the reason for tapering are that the economy's is ready for it," said Ward McCarthy, chief financial economist at Jefferies. "As far as the stock market is concerned, it's pretty optimistic. She still was reluctant to put a time frame on when the Fed might raise rates."

Yellen takes the helm as the Fed moves away from its extraordinary and controversial quantitative easing program, implemented to help keep interest rates low and drive up asset prices. The new chair defended QE but made clear that the Fed was on track to continue tapering and end the $65 billion in monthly purchases.